Politicians harbouring big dreams of a transformative riverfront redevelopment near downtown are due for a $40-million wake-up call from London Hydro, The Free Press has learned.

City hall is working with a private developer on a plan to turn the 5.6-hectare parcel that fronts the Thames River at Horton and Ridout streets into a massive mixed-used development they hope could transform the city’s image.

But London Hydro, the council-owned utility whose headquarters are located on the land, has other ideas — and says moving its operation would cost a jaw-dropping $40 million.

“It’s a valuable location for us,” Peter Johnson, chair of the London Hydro board, told The Free Press Tuesday.

“We would be more than happy to buy it from the city to secure our location in the future. That’s probably the best course of action.”

City hall is working on a plan with Kilmer Brownfield, a major developer owned by Toronto Maple Leafs boss Larry Tanenbaum, to clean up the land and build hundreds of condos and other properties that could boost its assessed value to $200 million.

The deal is far from done, though. Politicians will get an update on the process May 14.

One city hall source says it’s hard to see what the big problem is for London Hydro — beyond a storage yard on the waterfront site, it’s just an office building.

Johnson, though, disagrees. It’s home to electronics equipment that would need to be scrapped and replaced in any move, he said, and it’s also home to hydro-related infrastructure.

Beyond that, the central location is perfect, Johnson said.

“If the property is sold and redeveloped, we would have to relocate and we prefer to stay where we are,” he said, “because it’s centrally located and allows us to access our customers throughout the city.”

Vinay Sharma, London Hydro’s chief executive, deferred questions to Johnson. But he said the utility’s concerns are expressed in a report sent recently to city hall.

For politicians excited to turn the riverfront dream into a reality, London Hydro’s concerns may be premature. Coun. Joe Swan, who chairs council’s investment and economic prosperity committee, believes the project could be done without moving the utility.

“There’s no understanding yet that (London Hydro) will be affected in any way.”

The redevelopment is a big dream — and one fraught with complications, even before London Hydro’s concerns became public. It’s believed any deal with Kilmer would see the firm taking on the potentially massive costs of decontaminating the land.

And Harvey Filger, who had been stickhandling the project, resigned from city hall last week.

There’s also the matter of Labatt, the large brewery next door to the hydro lands. They’re concerned — a point Johnson raised Tuesday.

“Do you think Labatt wants a condo next to it?” he said. “It’s not ideal. When the hops are in the air in the summertime I wouldn’t want to be (in) a condo (nearby).”